Correlation Between Sunny Optical and CVS Health

Can any of the company-specific risk be diversified away by investing in both Sunny Optical and CVS Health at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Sunny Optical and CVS Health into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sunny Optical Technology and CVS Health Corp, you can compare the effects of market volatilities on Sunny Optical and CVS Health and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Sunny Optical with a short position of CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunny Optical and CVS Health.

Diversification Opportunities for Sunny Optical and CVS Health

-0.71

Correlation Coefficient

Sunny Optical  CVS Health

Pay attention - limited upside

The 3 months correlation between Sunny and CVS is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Sunny Optical Technology and CVS Health Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health Corp and Sunny Optical is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Sunny Optical Technology are associated (or correlated) with CVS Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVS Health Corp has no effect on the direction of Sunny Optical i.e., Sunny Optical and CVS Health go up and down completely randomly.

Pair Corralation between Sunny Optical and CVS Health

Assuming the 90 days trading horizon Sunny Optical Technology is expected to generate 1.11 times more return on investment than CVS Health. However, Sunny Optical is 1.11 times more volatile than CVS Health Corp. It trades about 0.13 of its potential returns per unit of risk. CVS Health Corp is currently generating about -0.04 per unit of risk. If you would invest  4,985  in Sunny Optical Technology on October 21, 2024 and sell it today you would earn a total of  1,290  from holding Sunny Optical Technology or generate 25.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Sunny Optical Technology  vs.  CVS Health Corp

Sunny Optical Technology

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sunny Optical Technology are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Sunny Optical unveiled solid returns over the last few months and may actually be approaching a breakup point.

CVS Health Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVS Health Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Sunny Optical and CVS Health

The main advantage of trading using opposite Sunny Optical and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sunny Optical position performs unexpectedly, CVS Health can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in CVS Health will offset losses from the drop in CVS Health's long position.

The idea behind Sunny Optical Technology and CVS Health Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.